Industry Canada

Industry Canada

June 29, 2005 14:35 ET

Government of Canada to Address Shipbuilding Subsidies in International Negotiations

OTTAWA, ONTARIO--(CCNMatthews - June 29, 2005) - The Government of Canada today announced it is joining international negotiations to curb government subsidies to the shipbuilding industry, as part of a drive to enhance the competitiveness of Canadian shipbuilding companies in the world market.

"We are committed to the success of the shipbuilding and industrial marine industry," said the Honourable David L. Emerson, Minister of Industry. "Addressing market-distorting practices at the international level complements the work we're doing with the industry here at home on a new shipbuilding strategy, and will go a long way to help transform the sector to compete successfully in today's market."

Representatives from Industry Canada and International Trade Canada will participate at the Organisation for Economic Cooperation and Development (OECD) shipbuilding negotiations, joining other countries that together represent about 90 percent of the world's shipbuilding capacity.

"Canada's participation at the OECD negotiations has the potential to deliver significant commercial benefits to Canadian shipbuilding companies," said the Honourable Jim Peterson, Minister of International Trade. "Canadian companies have proven expertise in niche markets, and will need to continue to exploit these and other opportunities. The OECD initiative is just one of the ways in which we hope to help the industry enhance its competitiveness."

The OECD initiative is one element of a comprehensive new shipbuilding strategy, currently being developed in consultation with Canadian industry and expected to be released this fall. Discussions to date have focused on transformative strategies to strengthen the industry's competitiveness, including work in the areas of research and development, and technology.

Historically, the global shipbuilding sector has been marked by government subsidization. Such support has led to supply and demand imbalances, as well as global overcapacity. In its shipbuilding policy framework, the Government of Canada committed to address support practices in international fora. Today's announcement is another step toward fulfilling that commitment. In addition, the importance of the export market to Canadian shipbuilders and the increasing globalization of the industry make it critical for Canada to have a seat at the table.

The Government of Canada is committed to developing strategies for key industrial sectors, such as shipbuilding and automotive, to ensure they can compete in a global, twenty-first century economy in which further trade liberalization is inevitable.




Backgrounder
Foreign Subsidies in the International Shipbuilding Industry:
Government Action to Support Canadian Competitiveness


The Government of Canada will participate as a member of a Special Negotiating Group (SNG) at the Organisation for Economic Cooperation and Development (OECD) to address government support practices in the international shipbuilding industry.

The mandate of the SNG is to "review and address market distorting factors, in particular government measures, pricing, and other practices that distort normal competitive conditions in the world shipbuilding industry, as well as mechanisms to deal with these."

Canada's work at the OECD is aimed at helping level competitive conditions in the world commercial shipbuilding industry - a commitment set out in the 2001 Shipbuilding and Industrial Marine Policy Framework.

Countries representing about 90 percent of the world's shipbuilding capacity are participating at the OECD negotiations. They include Korea, Japan, China, the European Union, Norway, Australia, Croatia, Turkey, Romania, Ukraine, Chinese Taipei, Mexico and Canada. The United States is not participating.

The Canadian shipbuilding and repair industry is competitive in a number of areas such as productivity, technology and quality. However, foreign government subsidization puts Canadian shipyards at a disadvantage when they compete in some international markets. An OECD agreement on shipbuilding that would curb subsidization would encourage competition based on product quality.

The export market is key to the Canadian shipbuilding industry and the Government is committed to enhancing access to that market through active international engagement. An OECD agreement that offers effective disciplines on government subsidies would strengthen our industry's ability to compete in today's increasing tariff-free environment.

The Canadian industry has established competitive niches in specific areas of higher-value added technology, including building yachts, offshore and inshore patrol boats, icebreakers, offshore supply structures and vessels, ferries and work boats. In addition, Canadian companies have been successful in attracting repair work on both domestic and foreign vessels.

Historically, there has been extensive government intervention in the world shipbuilding market. This has led to global overcapacity, which has resulted in supply and demand imbalances, and downward pressure on prices. To address this situation, a group of OECD countries negotiated the 1994 Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry. However, due to lack of ratification by all parties, it did not come into effect. Government intervention and imbalances have persisted. In 2002, the OECD established the current SNG.

While Canada has attended past OECD discussions as an observer, it will now participate formally to express its positions on issues under negotiation. The next meeting will take place July 4-8, 2005, in Paris, France.

Negotiations are scheduled to conclude in December 2005. It is expected that a draft agreement to be considered for ratification by participating governments will be ready in 2006.

Contact Information

  • Office of the Honourable David L. Emerson
    Minister of Industry
    Christiane Fox
    (613) 995-9001
    or
    Office of the Minister of International Trade
    Jacqueline LaRocque
    Director of Communications
    (613) 992-7332
    or
    Industry Canada
    Media Relations
    (613) 943-2502